Saturday, August 30, 2014

My Article Titled "Hong Kong's Land Policy: A Recipe for Social Trouble" (Part 3 of 3)

(cont'd)

Turning to Singapore

The
first HKSAR administration, headed by Chief Executive Tung Chee Hwa, was initially oriented
towards the housing model of Singapore, where the government acts as chief
provider of affordable housing for all those in need—financed by large
deductions from wages and salaries. But the well-meant Tung “85,000 policy”
came at the worst of times, right after the 1997 Asian financial crisis hit.
His policy, which would have reinstated the previous governments’ buffer
tactics by releasing more land for construction of additional public and
private housing over the long term, became a convenient scapegoat for a society
suffering effects of the regional financial crisis. The property cartel, which
vehemently opposed that policy, and disgruntled home owners who experienced
negative equity after the property market buckled in 1998, were among the most
vociferous critics. Since then, neither HKSAR government has wanted to hear
anything even remotely critical of their sacrosanct high land price policy.

Even
now, when public opinion demands price-stabilizing measures at a time of
runaway residential prices, a situation made worse by investment and
speculative demand coming from wealthy mainlanders, the Tsang administration
has remained unmoved. For example, it refuses to resume regular land auctions,
a once normal procedure that has been in abeyance since the market trough in
2002. Public opinion has claimed that replacing regular land auctions,
suspended for the past eight years, by an “application list” system is a chief cause
for the current housing shortage and skyrocketing property prices; this system
places the timing of sales and choice of sites in the hands of developers. But
there has been no official response to such opinion. Donald Tsang has also
ignored strong public demand for revival of the “home ownership scheme”, a
subsidized housing program dormant since 2002.

In the face of public outcry against a heavily
speculative property market, the Tsang administration has recently succumbed to
public pressure and has slapped a stiff stamp duty of up to 15 percent on
properties that change hands within two years. However, the new measure is not
expected to affect loaded investors with strong holding power, including those
mainland nouveau riches. All in all, it is nothing more than a short-term
palliative that has yet to prove its price-stabilizing effect.

As
researcher Yu-hung Hong pointed out in his March 1999 Land Lines article,
restrictions on land supply “have encouraged private land banking and property
speculation, leading to high land and property prices and making Hong Kong one
of the world’s most expensive cities.” He may not have foreseen that the land
and tax system gridlock would scar society in such a relentless way.

Alice Poon is the author of
“Land and the Ruling Class in Hong Kong”, published in Chinese in Hong Kong in
July 2010. The second edition of the English version, with a new prologue, came
onto the market in
early December and a simplified Chinese
editionwas launched in late
December.